Credit card choice more important as pound weakens

11 April 2008 / by Rachael Stiles

The ever weakening pound, which fell to a near all-time low against the euro yesterday, is making it increasingly important for people travelling abroad to consider the various debit and credit cards available.

The transaction fees and charges for foreign currency exchange can be significant, so Moneysupermarket.com is advising those thinking of going abroad this year to compare the different debit and credit card options available, because they will be paying more than usual as the Euro strengthens against the pound.

"While the strength of the euro is of concern to holidaymakers, using the wrong foreign exchange product can be even more costly." said Steve Willey, head of credit cards at moneysupermarket.com.

He suggests getting a credit card with 90 days' purchase protection, and finding one that offers competitive interest-free periods on purchases to minimise the costs of spending abroad.

The Post Office, Nationwide, and Saga also offer credit cards that do not levy foreign exchange fees within Europe, he added, and some credit cards do not implement any extra charges at all, while others will charge for withdrawals, transactions – which can cost £2 a time – and foreign exchanges, which can cost as much as 2.99 per cent.

Mr Willey concluded: "If you are stuck with an uncompetitive debit or credit card and don't have time to get a new one, the Caxton FX prepaid card is a good option. And if you are worried about overspending, pre paid credit cards will only allow you to spend what is on the card."

Meanwhile, F&C have predicted that current forecasts about the strength of the euro could be underestimating the impact which this could have on the UK economy and the American dollar.

"Exports have been one of the main drivers of the European economy during the last few years and the strength of the currency is a risk to earnings over the short to medium term," said Peter Jarvis, manager of the F&C European Dynamic Fund.

"This, combined with the current turmoil in the credit markets and fears about the depth of the US recession, means we expect European markets to remain very volatile with some core economies such as France and Germany showing more resilience than others such as Spain."